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William Blair & Company Partners With AdGooroo for Study of Search Engine Advertising Industry

CHICAGO, August 21, 2007 - William Blair & Company, in collaboration with search engine marketing intelligence agency AdGooroo, today published proprietary new research examining the search engine marketing (SEM) industry, looking at trends among the marketers that drive this $20 billion industry.

In an effort to assist investors and industry insiders interested in gaining a deeper understanding of search engine marketing, the Media and Marketing research coverage team at William Blair has partnered with AdGooroo to provide a new perspective on the industry through the lens of the advertiser. Data was culled from AdGooroo’s database of keyword advertising to glean insight into industry composition, industry growth, market share, seasonality, and company-specific trends.

The study shows healthy growth for the industry, with a steadily increasing advertiser count. By search engine, growth rates remain skewed in Google’s favor, with the leading search engine up about 15%, Yahoo relatively flat, and MSN growing less than 10%. Competitiveness for paid search is on the rise, and advertisers appear to be very seasonal with bidding strategies.

The study also examined the effects of Project Panama on Yahoo’s advertiser base, revealing that the company appeared to attract a surge of new advertisers after the launch, but then faced some fallout due to the relevancy-based ranking hurting some advertisers and its efforts to clean up the advertiser base. Second, the system appears to be serving up fewer but more-relevant ads with each search.

Another area of analysis involved the number of ads delivered per keyword by Google in order to establish a benchmark and to look for any notable trends that may indicate a change in Google’s ranking algorithms. The study discovered that the number of ads per keyword at Google has been fairly stable over the period, with all results within a tight range of less than 5% variability.

William Blair equity research analyst Troy Mastin, who provides coverage on 20 marketing, advertising, and media companies, wrote, “Based on our analysis, we believe that growth in the total number of search engine marketers exceeds that of industry sales growth, with the total number of advertisers up an estimated 20% between February and July 2007. In total, we believe that the global marketplace comprises more than 500,000 advertisers and that about 90% advertise with Google. We estimate that about one-half of Yahoo and MSN’s advertisers are also advertisers with Google, and that these networks attract approximately 30% and 10% of the total universe of search marketers each month. We continue to recommend Google as our best pick in the sector.”

While the research published today covers data from February to June of 2007, the team plans to publish this study on a regular basis and expects that the data will gain value with time.

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William Blair & Company, L.L.C. is a Chicago-based investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients' interests first and foremost. We place a high value on the enduring nature of our client relationships, the quality of our products and services, and the continuity and integrity of our people. William Blair & Company’s offices include Chicago, Boston, London, New York, San Francisco, Shanghai, Tokyo, and Zurich. For more information, please visit www.williamblair.com

Based in Chicago, AdGooroo provides competitive intelligence to search engine marketers through its suite of products, including AdGooroo Express, SEM Insight, and Trademark Insight. AdGooroo products leverage access and automation to provide paid search, natural search, and trademark monitoring insights, shedding light on competitors’ keywords, ad copy, campaign statistics, and more. Top agencies and big brand advertisers leverage AdGooroo’s keyword search tools and other unique products for search engine marketing success. For more information, visit AdGooroo.com.


Google Inc. disclosure

William Blair & Company, L.L.C. has received compensation for investment banking services from the company within the past 12 months, or expects to receive or intends to seek compensation for investment banking services in the next 3 months from the company.

William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.

Yahoo! Inc. disclosure

William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.

Additional information is available upon request.

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